2018 Supreme(SC) 1050

SUPREME COURT OF INDIA
R.F. Nariman, Indu Malhotra, JJ.
M/s PSA Mumbai Investments Pte. Limited – Appellant
Versus
The Board of Trustees of The Jawaharlal Nehru Port Trust & Anr. – Respondent
Civil Appeal No. 9352 of 2018 (Arising out of SLP (C) No. 8166 of 2018)
Decided On : 11-09-2018

IMPORTANT POINT
In absence of a concession agreement there is no arbitration agreement between the parties. Even on entering into concession agreement and if it contained an arbitration clause, the same would only cover disputes between a Special Purpose Vehicle and the Respondent No.1 arising from the Concession Agreement, and not between the Respondent No.1 and the appellant and Respondent No. 2.

Headnote:Government Contract – PPP – Disclaimer in the beginning of RFP – Ongoing process only a bid process – No concluded contract – Bid process to subsume a Letter of Award to be issued by the Respondent No.1 – Two further steps in the schedule to make the Concession Agreement an agreement between Respondent No.1 and the Special Purpose Vehicle, to be called the Concessionaire, constituted by the Consortium – Forum of dispute resolution during bid process to be courts at Mumbai – Up to the stage of the entering into the Concession Agreement, the bid process may be annulled without giving any reason whatsoever by the Respondent No.1 – Even after Concession agreement, not yet entered into, if it contained arbitration clause, it would only cover disputes between a Special Purpose Vehicle and the Respondent No.1 arising from the Concession Agreement, and not between the Respondent No.1 and the appellant and Respondent No. 2. (Para 13, 15, 21)

       (2009) 7 SCC 696; (2006) 1 SCC 751; (2010) 5 SCC 213; (1968) 3 SCR 387 – Relied upon

       (2009) 1 SCC 107; (2018) 2 SCC 519 – Distinguished

       Government contract – Letter of award – To be followed by two stages before concession agreement is entered into – Concession agreement would be binding on the parties – High Court erroneously holding that letter of award is binding on the parties. (Para 23)

       Facts of the case:

       The factual matrix in which the present matter arises is that the Respondent No.1 issued a Global Invitation of Request for Qualification in March, 2009 inviting applications from interested persons for the development of the 4th Container Terminal Project on Design, Build, Finance, Operate and Transfer Basis at Jawaharlal Nehru Port. The RFQ document expressly contained a clause by which the bidder could be a Single Entity or a Consortium. On facts, the appellant and the Respondent No.2 together formed a Consortium with the appellant as the Lead Member, Technical Member and Financial Member of the Consortium. The appellant is a Company registered in Singapore, whereas Respondent No.2 is a Company registered in India.

       Since the Consortium between the appellant and the Respondent No.2 qualified in the first stage, they were entitled to be considered under an RFP document floated by the Respondent No.1. The draft Concession Agreement contained an arbitration clause

       Respondent No.2 decided to opt out of the bid process.

       The bid security that was given by the Consortium was encashed by Respondent No.1 for the recovery of which, a Suit has been filed, which is still pending.

       By a show-cause notice by Respondent No.1, the Consortium was called upon to perform its part of the bid as originally agreed to. Since this was not done the Letter of Award that was accorded and acknowledged by the appellant on 26.09.2011 was “withdrawn” by the Respondent No.1. Consequent to this, Respondent No.1 claimed a sum of Rs.446.28 Crores by way of damages against the Consortium, and sent an arbitration notice stating that they were appointing Retired Justice V.G. Palshikar of the Bombay High Court as their Arbitrator.

       The Respondent No.1 continued to reiterate that it was governed by the arbitration clause in the draft Concession Agreement and that as 30 days had elapsed and no arbitrator was appointed by the Appellant, and as the said clause provided that the Arbitrator appointed by the Respondent No.1 would now be the sole Arbitrator to decide the disputes between the parties, called upon Justice Palshikar to adjudicate the disputes between the parties.

       An application under Section 16 of the Arbitration and Conciliation Act, 1996 was then filed before the sole Arbitrator by the appellant and Respondent No. 2, in which they argued that there was no arbitration clause entered into by way of agreement between the parties and that, in any case, the arbitration clause relied upon by Respondent No.1 would not fit the bill as the disputes that were to be adjudicated under that clause related only to a Concession Agreement which had not yet been entered into, the parties to which would be Respondent No.1 and a Special Purpose Vehicle, and not the Respondent No.1 and the appellant and Respondent No.2. The learned Arbitrator agreed with the appellant

       An appeal against the said order was filed before the High Court under Section 37of the Arbitration and Conciliation Act, 1996 in which the learned Arbitrator’s order was set aside.

       Finding of the Court:

       There was no arbitration agreement between the parties.

       Result : Appeal allowed.